Running your own business, instead of being conventionally employed, can bring challenges. However, those challenges are far from insurmountable—and many of those unique challenges bring opportunities that aren't available to traditional employees. From choosing your preferred tech stack to creating your own ideal work routine, there's a lot of freedom in being a new business owner. One of the greatest challenges (andopportunity) comes from having business expenses. If you're reading this from a hybrid coworking space, you're already on track—but we'll discuss some additional tips and insights for simplifying your business expenses.
5 Tips for Simplifying Business Expenses
There are a multitude of objectives for reorganizing your business expenses: lowering costs, finding value, making your business scalable, and simplifying things. Focus on that last objective to make sure your business finances are organized, easy to work with, and don't mix into your personal expenses and taxes.
1. Have separate cards and accounts for business purchases.
Diligent records are one way to separate your business and personal expenses, but that's tedious and takes a lot of time. It also might still flag an audit with the IRS, who won't have the same access to your documents when they start evaluating your tax records. Instead, you can simplify the process from the start and have separate personal and business checking accounts, as well as separate personal and business credit cards.
You can transfer the revenue from your business into the business account and pay your personal account a set salary. You can also clearly delineate your purchases by using the right card at the right time. This automatically generates a list of business expenses.
2. Ask your accountant about what qualifies as a business expense.
The line between 'personal expense' and 'business expense' can blur, even on seemingly innocuous purchases. For example, if you go out to a social networking event, is that more personal or business? If you upgrade your home internet to accommodate business needs, how much of that new cost can you assign to your business?
These questions quickly get into the weeds, so you should ask your accountant. They'll know (i) what counts as a total or partial business expense and (ii) how to document it adequately. They may even have a few tips for avoiding complications altogether. For example, instead of having a home office, it might be easier to subscribe to a coworking space right around the corner.
3. Try to make it clear what a business expense is.
When there are 'gray area' expenses, try to make it clear how they are business expenses. For example, if you talk with a client at a coffee shop that you also go to with friends, pay with the right card. You can also write the purpose of the visit on the receipt and take a picture of it. If you wait, you might not remember which occasions were for business and just lump them in with personal expenses (losing that potential tax reduction).
4. Keep your receipts organized throughout the year, not just at the end of the year.
Tax season is here, and that means most small business owners are quickly going through their records and preparing all their documents. But frantically rushing through this process right before April increases the risk of a mistake, and it also increases the workload on your busy accountant. Instead, try to keep your records organized throughout the year.
Separate cards and accounts will automate a lot of the process. You can also schedule meetings with yourself each week or month to keep your records in order.
5. Look for business services that end your reliance on personal spaces and personal time.
Many times, new business owners will leave business expenses as personal expenses for the sake of simplicity. For example, you might stay home to do work all day if you don't have field work, but that muddies the waters of what is and isn't business expenses. Instead, find a comfortable coworking office space that's convenient to get to and work in. When you're working in a dedicated workspace, then you know all the related expenses are business expenses. You won't have to spend time trying to decide how much of your home's square footage, coffee beans, and internet should be allocated to your work.
See Where a Hybrid Workspace Fits into Your Business Expenses
Business expenses can be complicated. But they also represent an opportunity to structure your finances and work routines in the way you like best. Quest Workspaces offers convenient, hospitality-driven coworking spaces throughout New York City and South Florida.
From coworking subscriptions to renting a private office – you can find a solution to fit your budget, workspace and business needs. Reach out today to learn more or visit an office near you.
